ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Yield is the annual net profit that an investor earns on an investment. The interest rate is the percentage charged by a lender for a loan.

Detailed explanation-2: -When interest rates rise, prices of existing bonds tend to fall, even though the coupon rates remain constant: Yields go up. Conversely, when interest rates fall, prices of existing bonds tend to rise, their coupon remains constant – and yields go down.

Detailed explanation-3: -During periods of economic expansion, bond prices and the stock market move in opposite directions because they are competing for capital. Selling in the stock market leads to higher bond prices and lower yields as money moves into the bond market.

Detailed explanation-4: -What is yield? Yield refers to how much income an investment generates, separate from the principal. It’s commonly used to refer to interest payments an investor receives on a bond or dividend payments on a stock. Yield is often expressed as a percentage, based on either the investment’s market value or purchase price.